Distribution networks could see revenue cuts for under-performance

Ofgem has warned electricity distribution network operators (DNOs) that their revenue could be cut following a review of how well they are dealing with new customers that request connections.

Based on provisional information provided to Ofgem the cut in revenue could be up to £13.9 million across all six DNO groups.

Ofgem said managing connection requests is an essential part of DNOs’ customer service, especially as the energy system is rapidly becoming smarter and more flexible. New businesses, generators and housing developers are among those that depend on an efficient connections service.

As part of their 2015-2023 price controls Ofgem set DNOs an incentive to engage effectively with larger customers requiring new connections. Failure to meet minimum expectations can lead to a financial penalty.

Following feedback from customers to its consultation in July, Ofgem said it believed is that all DNOs “may have fallen short of these expectations”.

‘Each DNO faces revenue reduction’

Ofgem said many of the failings involve poor communication. For example, some customers struggled to get progress updates on their connection requests or found that information they were provided by a DNO was not detailed enough. In other cases the DNO failed to explain the cost of reinforcing its network when making quotations for connections work.

Ofgem said that in general, DNOs seem to be improving their engagement and services but some specific issues raised by stakeholders remain unaddressed. As a result, each of the DNOs faces a reduction in its revenue.

The regulator is now consulting on its view, giving stakeholders and the DNOs a further opportunity to provide evidence on performance.

A final decision on each DNO’s performance and whether they will face revenue penalties will be made by the end of November.